The Fagan Financial Report

May 4th, 2025

Episode Transcript

Speaker 1 (00:00):
Good morning, and welcome to the Capital District's Money and
Investment Program. You're listening to the Fagan Financial Report. I'm
Dennis Fagan, sitting here with my son Aaron, as we
do every Sunday right here in news tol K ten
and one O three one WG. Why it is Friday morning.
The market is up and running, and non form payrolls
exceeded expectations. We'll talk about that. A lot of earnings
information this past week two are from Amazon to Microsoft,

(00:24):
to Meta to Apple. We'll touch on that because those
are some of our largest holdings and I'm sure widely
held throughout our listenership. Good week on Wall Street, some
progress really on the trade front. We'll see what happens
there and then we'll see I mean, I think many

(00:44):
expected payroll growth to slow during the month of April,
and it did not. One hundred and seventy seven thousand
new jobs created. Juxtaposed against that, I guess you would
say that initial claims front employment benefits, which is current numbers,
rose eighteen thousand and two forty one, So that's weakening
a little bit. But anyway, so so if this is

(01:05):
airing on Sunday, so yesterday, Jude's birthday was your son's
third birthday. Yeah, give me, give me your feelings about that.

Speaker 2 (01:14):
Like you know, everyone says it goes by fast. It
does go by fast, but you know, it's fun. I
think this is the first birthday he really realized it
was his birthday. I think it was. You know, it's
been a fun, fun process.

Speaker 1 (01:28):
You know.

Speaker 2 (01:28):
On Thursday he had school and they sang Happy Birthday
to him, and he was so excited when he got
back in the car. So it's been fun. You know.

Speaker 1 (01:36):
Yeah, I bet and he you know, he uh having
you saw mom and I saw him this week and
he was, uh, you know, I think you when you
were coming in from you and Lauren being out you
had talked to me. He was he was excited because
he was, you know, looking forward to that day. And yeah,
he's he can actually kind of spread time about a
little bit.

Speaker 2 (01:55):
Yeah, he woke up Friday thinking it was his birthday.
That oh he did a little Uh, he was a
little say it on Friday when we told him it
wasn't his birthday party yet. But yeah, he's excited. And
now it does go by fast though.

Speaker 1 (02:07):
Well, you know, and when you said that I thought
to myself, you're you're thirty five. Your sister's thirty seven. Man,
that went by fast. So you've got the ability really
to say, Okay, this, these three years go by fast.
Let's not let the next thirty five go by fast,
you know what I mean? Yeah, so enjoy it. And
for all the all the listeners out there, you know,
I share the same well wishes, And even to myself,

(02:29):
it's like, you know what, stop and smell the roses
once in a while and get off social media. Yeah,
you know what I mean. And I think, I think,
I think you'll be I'll be much happier, put it
that way, anyway. So non farm payrolls one hundred and
seventy seventy seven thousand in April. The consensus was for
one hundred and thirty three thousand. Unemployment rate right at

(02:50):
four point two percent as expected, labor market holding relatively stable,
average oley earnings up two tens percent annualize year over
Europe three eighths three point eight not bad at all.
Non Farm payrolls last month revised down a little bit,

(03:10):
but again above about forty four thousand above the consensus.
A little bit lighter, a little bit of a job
shedding in federal government employment by about nine or ten thousand, warehousing,
financial services up. So all in all, I think, you know,
I think it's a jobs report that is benign. I

(03:34):
don't think it's something that really warrants any type of
major portfolio changes. President Trump did post something, let me
just see after report it gonna I don't know exactly

(03:59):
what he posted. I think he did post something about
lower interest rates, but I don't want to quote something
that I'm not sure. So here we have it. We
have a labor work cut, and I think that's going
to cushion the blow from the tariffs. It doesn't make
in our mind, and we talk about it in the
second half of the show. It doesn't make in our mind. Really,
it doesn't justify the nature of these tariffs as a

(04:23):
broad economic policy in our opinion. All Right, However, the
economy is much more able to withstand a headwind such
as this than it would be otherwise if it really
wasn't if we were struggling to begin with. Yeah, so
I think that's a big positive for the market right now.

(04:47):
Other economic data air it came out Institute for Supply Management.
This is on Thursday, Composite Index of Manufacturing activity down
to forty eight point seven compared to forty nine in March. Generally,
speaking of read about fifty indicates an expanding manufacturing sector.
Construction spending spell. Construction spending fell, And I think the

(05:08):
biggest news for the week, other than the non form payrollport,
you know, as it pertains economic releases Q one GDP
down three tenths of a percent, down from a gain
of four tenths of a percent two point four percent
during Q four and as compared to three point one
percent year over year, Government spending fell at an annualized

(05:29):
rate of one point four percent. Inventory added two point
two five percentage points to Q one GDP, and personal
consumption expenditures something filed closely by the Fed, rose at
an annual rate, and this bothered the market a little
bit of three point seven percent, and the PC excluding
food and energy up at a rate of three point
five percent.

Speaker 2 (05:49):
And you know, I we had a I guess a
contracting economy. We had some negative GDP growth in the
last quarter, and so First Trust put out something and
you know, I meant to bring it in with me,
but you know what happens to the stock market when
we do go through a recession, and you know, typically
either there's been twelve twelve recessions in the past. Let's say,

(06:11):
I think, you know, seventy to eighty years, last one
being in two thousand and twenty. You know, we had
two negative quarters of GDP growth during COVID, and you know,
the market was up six months higher. And you know
when when they during a recession. You know, people might

(06:31):
not think this, but the market has actually been up
during a recession at three point five three percent on
average over the twelve recessions that we had. It's leading
up to the first recession where the market is usually
doesn't do as well. Yeah, the market is down about
thirty five percent from two thousand and seven to two
thousand and nine during that recession. But overall, you know,

(06:52):
it's usually the build up to the recession where the
market tends to do poorly. And I think what we've
seen here is, yeah, the markets down about five percent
year to date, you know, building up to you know,
what might happen through some of these policies, but you know,
maybe maybe these companies can continue to be resilient. You know,
I think as long as the consumer does remain strong,

(07:14):
that will put a floor in the market, that will
put money into the economy and spending. You know what
I'm a little bit more nervous about, isn't you know,
the session, because I do believe it will be mild.
I think it's you know, a stalling of progress and
the innovation that we've built up in the past, you know,
five ten years in technology that has really outpaced a
lot of the expectations that we had for you know technology.

(07:38):
You know artificial INTEUG we have jat GBT, we have
Gemini from from Google, so there's a lot of good
things going on. You know, Amazon Web Service has just
had seventeen percent year over year growth. Microsoft was in
the mid twenties with their Azuri year over year growth. So,
you know, the stalling of CAPPAC spending due to uncertainty
is I think my biggest uh fear with this economy

(07:59):
in the stock market right now. But if we can
get over these uncertainties like tariff policy, like foreign relations,
that I think, you know, the market could push higher well.

Speaker 1 (08:11):
And I think we were talking about where we were
talking about you were talking about the market leading up
to a recession and I think so during a recession,
the stock market's actually up leading up to a recession
in anticipation of an economic slowdown is when it gets hit.
But if you think about what the last why the

(08:31):
last two recoveries in the stock market were V shaped
recover The one in twenty twenty was a V shaped recovery.
The one in two thousand and two was a lot longer.
Twenty twenty two was a lot longer. It remains to
be seen. And as far as the market, the correction
in the market, remember the S and P five point
it was down about nineteen percent from its highs and

(08:53):
went down over three or four week period. Earlier this year, Yes,
the NAS that composite was down twenty percent over three
week period beginning when Trump President Trump first levied the
tariffs on April second. In fact, it was down I
think about over a couple week period, that a three
week period, And so I think what the stock market

(09:14):
said with that sharp d climb in this prior, you know,
earlier this year, in addition to twenty twenty, was this
was an external shock? Was the economy is doing well,
was doing well in twenty was doing well earlier this
year This was an external shock which in twenty twenty,

(09:35):
the market V shaped a due to the depth of
the pullback, but b due to the relatively rapid vaccine
that our drug manufacturers were able to produce and invent
over a relatively short period of time. So the market
did a V shaped recovery and snapped back.

Speaker 2 (09:56):
I saw a lot of money come into the economy,
a lot of money come in Trump administration.

Speaker 1 (10:00):
So so so then you have so then you have
twenty two, which was your classic type of a bear market,
which was economically induced from from interest rates going up.
Now you have one which the jury the jury is out.
If President Trump makes some headway with negotiations with our

(10:21):
trading partners, the market will at least sustain itself, you know.
Let you know, and again when you when you when
you think of investing, you know, you think of the downside.
Let the upside take care of itself. So I think
it will at least sustain itself. But possibly, as you
mentioned three or four minutes ago, move higher. But we'll
see how this plays out. That said, the longer the

(10:43):
uncertainty remains for the for the economy, the longer these
tariffs remain and a lot of people say, look, this
will take two or three years to hash out. You know,
that's how long trading agreements take. If they if they
get a framework for a trade packed, well they'll maybe
that will be enough for the market. So so we'll
see how it plays out. I think we probably have

(11:04):
thirteen or fourteen percent cash now air in client portfolios
and kind of comfortable with with where that stands right
now given the uncertainty, and also with interest rates up
at four point four point two four point three percent
in the ten year.

Speaker 2 (11:18):
You're still getting you know, over four and a quarter
on money market funds and through schwabs. So you know,
I think that, you know, it's a it's a good
portfolio overall too. You know, we obviously have more cash
for more conservative portfolios than for you know, more growth
her portfolios. But you know, I do think that's a
that's a fair amount of cash, especially right now with
the uncertainty that you know, the next half of a year,

(11:40):
let's say we have ahead of us.

Speaker 1 (11:42):
Yeah, and in the second half hour we'll talk about about, uh,
you know, what we are, the information that we released
in our newsletter and some of the investments that we're
using really to to invest in. Now let's let's let's
look at some of these earnings this week. Aaron, I
don't know what you want to start with, which one?

Speaker 2 (12:00):
Microsoft, Microsoft, to Microsoft in front of you know, Microsoft
had good earnings. You know, it has not had a
good year. If you look at its past year performance,
it's up eight point five three percent, and you know,
it was basically flat before yesterday, if not, it was
actually you know, on April twenty fifth, it's one year
performance was you know, April fourth one year performance was

(12:20):
down eight percent. So it's had a sixteen percent rally off.
You know, its bottoms when the when the market pulled back,
and you know a lot of people are you're nervous
about you know, innovation within Microsoft stalling Azor growth. But
I think what we've seen, you know, with this past earnings,
you know, it was up about nine percent on Thursday,
Earnings per share at three forty six verse three twenty two,

(12:41):
revenue at seventy point oh seven billion verse sixty eight
point four for two billions. So you know, I think
what people wanted to see what this earnings called with Microsoft,
was there Azor and you know, yeah, it was up
seventeen percent since last quarter. Their their revenue growth in
a zor so you know, a great company. I think

(13:02):
you know, it was up another two three percent as
of mid day on on on Friday, So yeah, well
a Zoo revenue grew thirty three percent, you know, a
year over year with anticipation of thirty point three percent,
so over you know, three percent, ten percent higher than expected.
An intelligent cloud which includes Azor was produced twenty six

(13:23):
points seventy five billion dollars in revenue of twenty one
percent from from U from consensus so or from last year.

Speaker 1 (13:31):
So expected to be eighty billion this year.

Speaker 2 (13:35):
Relatively cheap, I'd say, you know, historically with Microsoft p
E ratio of thirty three, a little bit more expensive,
expensive than a few years ago. But you know, debt
to equity at point one three. It's a really well
run company.

Speaker 1 (13:52):
But you know, I think the biggest, one of the
biggest pieces of news that came out of there was
Satya Nadella, the CEO, said as much as thirty percent
of the company's code is now written by artificial intelligence.
And I quote this is what he says. I'd say
maybe twenty thirty percent of the code that is inside
of our reposts today and some of our projects are

(14:12):
probably all written by software. And think about what crazy
what that means for profit margins margins going forward. So
I think that's a lot of that is what propelled
the stock hire and we'll see, we'll see, you know.
I think I think the other thing too is the

(14:34):
stock market's been up eight or nine days in a row,
and this is not a market you chase because it
can turn on a dime. Just make sure that I hope,
if you've been listening to the show, that you have
had adequate percentages of your portfolio in the stock market
that are in alignment with your longer term objectives. Right,

(14:54):
you never really want to get frightened out of the market,
and you never really want to, you know, go all
in unless unless you're a growth investor. So just and
I hope you've had an appropriate amount of your money
in the stock market, again in alignment with your objectives.
If and at this point in time, I probably wait
for Microsoft to pull back a little bit. Yeah, Matta

(15:16):
also reported earnings there. I don't know if you have
that in front of you, Yeah, that you can discuss that.
Would you like me to do that.

Speaker 2 (15:21):
Can you discuss it so I can look over my notes? Please?

Speaker 1 (15:24):
Sure, sure, I'd be happy to. I'd be happy to again.
I think similar news to Microsoft earnings per share of
six dollars and forty three cents a share versus five
twenty eight expected revenue forty two point three billion versus
forty one point four billion, expenses one hundred and thirteen
so one hundred and eighteen billion total twenty twenty five expenses.

(15:48):
Capital expenditure is looking to come in between sixty five
and seventy billion, up from its prior outlook of sixty
to seventy five billion. So I think that's a big plus.
I think of a Reality Labs operating loss of four
point two billon. That's kind of like their uh, kind
of like their their wish sure their their future types

(16:11):
of businesses of loss of four point two billion, less
than the four point six billion that was expected. Let's
see else. Can we say average Deli what is that.

Speaker 2 (16:24):
Three hundred and fifty million threads users? You know their
advertising business is just extremely strong. You know they have
growth in their AI as well as infrastructure that LAMA
that competes with open AI. I think will continue to
do well. And you know, you know, although although they
only are advertisements, they are you know, diverse in that
they do have Instagram, they do have Facebook active use.

(16:46):
They you know, they have three hundred and fifty million
active users with this thread. So you know, I'm I think,
I think it's it's a good company that just continues
to be you know, a cash cow.

Speaker 1 (16:56):
Yeah, exactly, that's a good way to put it, you know,
and then where they can kind of uh turn on
and off the spigot of capital expenditures and invest daily
active users on all other platforms. Three point four to
three billion, that's half the people in the world are
on you know, either Facebook or or Instagram, Daly. And
that's up from three point three five billion in the

(17:19):
first quarter. And then that's a that's just an unbelievable
number when you when you think about it.

Speaker 2 (17:24):
Eight point two two billion dollars in first quarter advertising
sales stemming from the Asia Pacific. So you know, they
really have inroads everywhere. I think what you could see
some issues coming up might be anti trust. The point
will have kind of been you know, front and center
with you know, anti trust regulation within the within this administration.
So but you know, really really great earnings.

Speaker 1 (17:49):
What's the other couple other companies reported earnings Starbucks. Starbucks
reported relatively poor earnings. We own about twenty thousand shares
for our clients. I think they're having I think there
is turnaround going on.

Speaker 2 (18:05):
You know, I was in a Starbucks the other day
for a meeting.

Speaker 1 (18:08):
Actually, and you've been negative on Starbucks.

Speaker 2 (18:12):
Yeah, we sold We sold the good portion three quarters Starbucks,
you know, and I was in it. I was in
a Starbucks the other day basically, and you know, we
actually had our coffees there and the lady brought over
the coffee to me and she's like, oh, I don't know,
I said something nice. But you know, it's Starbucks keeps
on flip flopping from Hey, we're gonna get people in

(18:32):
and out the door, to oh, this is a place
to sit down. So I think Starbucks, with their new CEO,
is really trying to find their own identity. You know,
Brian Nicol is a CEO. He came from Chipotle. So
it seems like they're having a little a little bit
of a brand identity issue, and I think they'll continue
to struggle. There's a lot of coffee places out there,

(18:53):
they'll have they'll have they could have issues with you know, currency,
with the cost of a beans, with tariffs. So you know,
I think they just have a lot of things going on,
almost like like an airline company.

Speaker 1 (19:05):
Even even even China. I mean, there's a I think
there's a sense of nationalism going on around the world
that is uh somewhat anti American. You see it in Canada.
Uh there are certainly uh the uh echo of that
from China. And I'm not saying I think it's and

(19:26):
that's the same thing we're experiencing right now, I think.
So you've got to you perhaps Starbucks will have a
headwind in some of its uh some of its markets
outside the US.

Speaker 2 (19:37):
McDonald's is the same thing, you know, they said, And
who knows if it's just an excuse, an easy excuse
to say, you know, you're seeing some backlash from you know,
McDonald is a classic American company. But you know, Brian
Nichol said, we expected the bounce of the Fiske GEO
will bring some challenges. We navigated dynamic macro economic environment,
including tariffs and volatle coffee prices. So there's just a
lot going on for Starbucks to remain, you know, a

(20:00):
successful growing company. Global sales felt one percent.

Speaker 1 (20:04):
I guess I would not I wouldn't sell it here.
In my opinion, I would not, uh underestimate the ability
of Brian Nickel, former CEO of Chipotle, his ability to
turn Starbucks around.

Speaker 2 (20:21):
It just might take some time, take a.

Speaker 1 (20:23):
Little longer then than what might have been initially anticipated.

Speaker 2 (20:27):
Even just enjoyed. There's just a lot of good coffee shops, you.

Speaker 1 (20:31):
Know, there are, but if you're if I'm traveling, it's hard,
it's hard to go into any questions. You know, if
you're traveling, you know, you look for something where you've got.

Speaker 2 (20:41):
You know, at one point, Pily five or six years ago,
they were trying to open five hundred stores in China
and that.

Speaker 1 (20:46):
Was a mistake obviously a year.

Speaker 2 (20:48):
So yeah, I think that you know, even with our
relationship with China, that that could that might not be
as easy as once expected. And I think, yeah, you know,
there's just so many factors that go into Starbucks. I
think they said their operating margins were cutting half almost
this year, so yeah, they have a lot of headwinds
even you know, even with their own employees, you know,

(21:10):
backlash from a lot of employees unionization. So there's just
a lot of moving parts. And I think there's a
lot of good companies out there that.

Speaker 1 (21:17):
That better looked than Starbucks. Well, I also think that
they had it was difficult for them coming out of COVID.
I mean they had to re jigger so to speak,
there the way they did business. They did a lot
more drive through and I think a lot of people
realize that, hey, I'm not going to go into Starbucks,
I'm just going to go through the drive to or

(21:39):
I'm not going to have my meeting here, I'm going
to have my meeting through Zoom or whatever. So I
think that that is certainly hitting star wars a couple
other companies. I don't know if you have them in
front of your Amazon and Apple reported earnings both some
of our larger holdings, both down a little bit post earnings.
I don't see either of them really as a has

(22:01):
a major reason to sell anything.

Speaker 2 (22:03):
Into The Apples a little expensive and I hear their
growth rates, so I think that takes a apple. We
should take a look at Apple here, even with their
manufacturing still, you know, although they are manufacturing a lot
of products in India, they're still manufacturing a lot of
products in China. So, you know, I think that Apple
has quite a bit of headwinds for being what thirty

(22:24):
thirty three times earnings that you know, I don't.

Speaker 1 (22:27):
Know, with relatively slow margins are about forty seven percent.
I think service margins.

Speaker 2 (22:32):
It's just the revenue growth. It's just hard when you
have so many people who already have your product, your.

Speaker 1 (22:38):
Product, and I think that's what that's what we're faced with.

Speaker 2 (22:41):
I think, yeah, they're seeing a little bit of stalling
innovation as well. You know, artificial intelligence is great, but
you know, basically it's a you know, it's a it's
a glorified search bot right now. And so I think
until you see some you know, innovation with the iPhone,
people you know won't be rushing to buy them.

Speaker 1 (22:58):
And I think the final company that we can talk
about one of our larger holdings of Amazon, I'd be
buying Amazony me too.

Speaker 2 (23:05):
On web services, uh, you know, growth year over here
in AWS. So I think it's a great company. Those
you know, they could face some tearff headwinds, but you know,
I think that they're going other sectors advertisement and their
cloud that you know, that's uh, I would still be
buying it here.

Speaker 1 (23:23):
I would too. That's so that pretty much wraps up
the first half hour of the Fague Financial Report. Strong
Market this week will be spread this conversation out to
second term to talk about the earlatest news that are
that we send to our clients and contents within that
and then some of the investments that we're making now
given the vowel to market. But right now it's ten

(23:45):
thirty on the station you depend upon for news, weather
and information, News Talk eight ten and one O three
one W G Y. Good morning, and welcome back to
the second half hour of the Capital District's Money and
Investment program. You're listening to the Fagan Nancial Report. If
you're listening during the first half, you'll know that we
recap the economic data that came out this past week,

(24:07):
the jobs market, earn our training, Microsoft, Meta, Amazon, Apple,
and now we're gonna widen this out. You know, we
sent out our quarterly newsletter. If you want a copy
of it, go to Faganasset dot com. We'll get your copy.
If you're a client, you're receiving it. If you're not
a client, you're welcome to receive it. It gives our

(24:30):
two cents on the markets, investing in a broader perspective
our largest holdings at the end of the quarter. And
this included some teriff thoughts too. So pretty interesting newsletter,
if I would say so myself. Aaron and I write it,
and uh, we're happy to get a copy out to
you whenever you need it, if you if you'd like it,
excuse me. So, so we're gonna in this second half,

(24:52):
iur will talk. We'll talk about what's in the newsletter.
Then if we have time. A good article by Shelby
Fishman that's entitled fourteen Financial Pros revealed the number one
money concern their clients are facing right now. And you know,
having read this, it's a lot of concerns that our
clients are voicing to us as well. So we will

(25:12):
discuss those time permitting. How does that sound there, Yeah,
twenty four to fifty. So we highlighted some of the
interesting things from the newsletter and it starts out within
the first paragraph of our Q one newsletter twenty twenty
five newsletter written on January eleventh, we wrote that at

(25:32):
Trump administration, this was before the inauguration, A Trump administration
brings with it a much wider range of potential economic
outcomes than that of a traditional politician. Even though his
agenda may ultimately proved successful, the unorthodox nature of his
approach maybe accompanied by uncertainty as he bucks the system.
Nothing has changed to dissuade us from his stance. And

(25:55):
then we filed that up basically saying that, you know,
obviously we're rooting for the president to do well. Who
wouldn't be. The market went up leading to the inauguration
and paraphrasing, and after that, the market went down because
of some of President Trump's policies, although.

Speaker 2 (26:10):
I don't necessarily agree with him. Inheriting Trump's poor economy,
I mean antment with Biden's poor economy, I mean unemployment
was that record lows? You know, sentiment was you know,
decent compared to who you wanted to listen to. You know,
the left would say it was good, the right would
say it was bad. But yeah, you know, I think

(26:31):
that people are starting to get nervous with tariff talks.
You're seeing some issues at the ports, You're seeing some
issues with you know, agriculture. So I think that a
lot remains to be unseen. You know, even Microsoft startings
that just came out. I know we talked about them
on the first half, but you're seeing capac spending stalling
a little bit, So I think people are in a
little bit. Hey, let's let's wait and see what's going

(26:51):
to happen here.

Speaker 1 (26:52):
Yeah, And I think that in the in the returns
of the market was what was reflected post in alluration
that concern and as those concerns heightened, he saw the
market pull back. And we went on to say within
the newsletter, with the above in mind, we believe that
absent any black Swan events, the intra day low for

(27:13):
the S and P five hundred of forty eight thirty
five set on April nine, seventh, will most likely hold
throughout the quarter. So we do think that, however, unless reconciled,
as the end of the ninety day tariff pause approaches,
and that'signer about July ninth, tensions should begin to rise again.
And here we are sitting on May third or May fourth,
excuse me, I think at some point in time, as

(27:34):
we get closer to that date, you know, than the
market will begin to feel that uncertainty. And as we say, coincidentally,
this day coincides roughly with the deadline for Congress to
have passed all budget appropriation bills right, And I think,

(27:54):
as noted above, the financial market's misread President Trump's intentions
regarding tariff says it assumed that he would apply them
in a more appointed fashion than what was ultimately deployed.
Was also assumed that countries with low trade weighted barriers
will perhaps be exempt from any pusative measures. So there
we are, you know, with I guess the first page

(28:14):
of our news that are you know, bringing bringing investors
to to where we are? When it went on to
discuss the impact of tariffs, higher prices resulting from the
imposition of tariffs are generally paid by the importer, the
end user of the product, or a combination of the both.
Either way, unless the importer absorbs one hundred percent of

(28:36):
the tariff being applied, higher prices will be the result.
And I think that goes without saying. Many believe that
this will be a one time pass through, while others
think that this will lussure in a longer lasting period
of inflation, like many things in life. Probably a little
bit true. Maybe some companies absorb those price increases in
their entirety others pass them along in their entire but

(28:58):
I think here you probably see companies absorb some of
the prices and pass some of them along, absorb as.

Speaker 2 (29:03):
Much as they can, you know, pass along and also
pass along as much as they can too. So you know,
and I know we do say in the newsletter, you know,
absent of any black Swan events. But I think when
you know, the the more unknowns and uncertainties you have
in the economy, the more things that you put in
the economy that you can't back test, like these tariffs,
you know, the more uncertainty you bring. And I know

(29:25):
we do a chart talk every week. Doug did it
this week, and he you know, he's told and he
goes on to talk about you've seen recently an increase,
you know, especially since February third, an increase in volatility
CBO Volatile Volatility Index as well as a decreasing dollar.
So you know, usually when you see an increase in volatility,
you see people flock to the dollar, and you're not

(29:46):
really seeing that now. You know, the dollar is usually
seen as a safe haven among the international community, global community,
so you're not seeing that right now. So you're seeing
some things that are signaling that people are be being cautious,
and I think we are too. Even in the market.
You saw a lot of good earnings this week, as
we discussed, Microsoft had really good earnings. Meta have really

(30:08):
good earnings. But you saw pullbacks in the market throughout
the day, and I think that's kind of signaling, Hey,
we're gonna be range bound for a while until we
see what this outcome will be. You saw a little
bit of a drop in GDP this past quarter, so
I think, you know, people are being cautious. As the

(30:30):
tariffs that Trump has implemented or threatened to implement in
the first half of this year, I think we're still
in the wait and see and how this tracks for
the second half of the year. Was there some front
loading at the end of last year and early this
year before tariff, So I think it. I think being

(30:52):
range bound is what we're gonna see for the foreseeable future.

Speaker 1 (30:57):
I would agree with that. And it's not it's it's
not a boring situation. It's first of all, it's it's
a matter of fact. The S and P sits around
fifty six hundred fifty six hundred or so. I think
what you want to do is continue to kind of
look at your portfolio. You don't make wholesale changes. I

(31:19):
think one thing we've learned from President Trump is that,
you know, things change rapidly. You know. A good example
is Amazon. This past week, Amazon, whether they intended it
to be released or not, or who assumed it. I
talked about putting the cost of the tariff cost on
the increase of the cost of let's say something they sell,

(31:44):
the tariff component of it. And then the administration reached
out and said it was a politically biased or politically
motivated and they took it off again.

Speaker 2 (31:54):
With the Amazon.

Speaker 1 (31:56):
Yeah. Yeah, So I think you see a lot of Well,
you don't want to make you don't want to make
big decisions. I don't think you want to make a
big decision based upon something that's tweeted out or something
that's mentioned by President Trump or one of his lieutenants,
and and and and because I think you'll regret it.
So so that you know, we went on.

Speaker 2 (32:16):
And I mean no, it's I mean it's so basically,
you know, it's if it was a good idea, why
would she say that. I mean, you know, if if
she I think that Amazon, let's say and it wasn't
really Amazon was almost like a subsidy of Amazon. I
feel like if it was, if it was a good idea,

(32:39):
these tariffs, that we wouldn't be telling them to take
it off and saying it's a hostile act.

Speaker 1 (32:46):
Yeah. Well regardless, I mean it's a matter of I
think that my point was more that it's just a
it's a it's a volatile situation. It's a fluid situation,
and I think you just kind of take everything with
the grainite salt, you know, focused on the long term.
We went on and had four or five points in there.
You know, recognize that despite this pullback, the goals you
created when you initially invested are intact, and that this

(33:06):
will come and go and over the longer term, you
kind of, you know, keep your eye on the prize
and let some of the shorter term issues play themselves out,
you know, I said, you know, I think Congress is
the ultimate put for this administration. You know, if the
administration continues along the line that the market is not
happy with, then goes down. And it was a nice
rally this week, We had a rally last week. But

(33:28):
if the market turns around and heads back down, I
think that that we saw that where the bond market
exerted pressure on President Trump on April eighth or ninth
and around there, and President Trump mentioned that, you know,
he changed his tune a little bit in the tariffs
because people were getting a little queasy and I quote. So,
I think that's kind of what you're going to see
over and over again with the president is out. As

(33:50):
this plays out, we're going to see many conflicting stories
that are going to sway you to move one way
or the other. I think that and what you have
to do is, uh, you know, be wary that you
know the information you're getting may or may not be
a up to date, be true uh you know, or

(34:13):
see just just partial part of the whole uh part
of the whole uh news item, or part of the
whole part of the entire information that you need. So
beware of information overloads stemming from one entity. It's one
of the things we wrote as it tends to skew
your decision making process. If you're always watching MSNBC, if
you're always watching uh Fox, you're gonna you're gonna you're

(34:35):
gonna be on a roller coaster ride with your emotions
as it pertains to your investments.

Speaker 2 (34:40):
And you say, you saw ism manufacturing dip a little
bit this path month past month of forty eight point seven.
You know, in below fifty is usually not a good
sign for economic growth. So again, you know, I think
that we're going to be in a wait in CE mode.
And you know, I think what makes me the most
nervous about being in a way and C mode is
the the United States is usually a country of innovation

(35:02):
and progress, especially top line growth revenue growth. So you know,
you saw this past quarter Amazon CAPEC spending, I'm stalled
out a little bit. So what we don't want to
see is stalling out of CAPEC spending, which leads to
a stalling out of you know, revenue growth for a
lot of these great companies.

Speaker 1 (35:19):
Right, But so that that's but that's going to last
for a while. You know what what's an investor to
do now, do you think is with with their with
their with their portfolio. As we sit here and people
are listening to us, say, okay, we know the tariffs
are going to be uh, we know it's going to
be up in the market from time to time. You know, what,
if I'm saving for retirement, what do you what do

(35:39):
you do a little bit different with your portfolio? If anything?

Speaker 2 (35:44):
You know, you're seeing the ten year treasury, five year
treasury above four percent, so I think you have to
have an allocation towards bonds. I mean, you have a
lot of great dividend payers out there. You know, even
s CHD Schwab dividend pays a dividend of you know,
north of three percent too. I think I got to
get the exact numbers right here, but it looks like
it's a yeah, divin and yield of about three percent.

(36:10):
So I think you have if let's say we are
range bound in the market, let's say goes nowhere for
the next year. So you know, I think you have
to have things that generate income. What do you think?

Speaker 1 (36:20):
Yeah, I agree, you know generate You know you mentioned bonds,
You mentioned dividend paying ETFs, you mentioned SHD n O
b L. Yeah, is another ETF that you can use,
the Dividend Aristocrat Fund. You can use Preferred Stock Index
PFF to pick up some income you had mentioned. I think,

(36:44):
you know, the five year treasury yielding over four ten
years come down a bit yield in about four wouldn't
go that far right, maybe five or six years. Hold
some cash. I think our cash position is around thirteen
percent our average cast position. Most most cash positions arerunning
around ten percent. Money markets are paying for b I L,

(37:04):
which is a short term ETF has been a little
over four.

Speaker 2 (37:07):
I think as the consumer, if the consumer remains strong,
I still think you can have some utilities in your portfolio.
The XLU it's up about three point nine percent year
to date. I think you can, you know, hide there
in quotations, pick up a dividend and UH. As long
as the economy remains somewhat strong, I think that sector
should do pretty well as well.

Speaker 1 (37:25):
The market moves, though, like when you when you say
that though, the market moves in anticipation of events, and
it's it's uncanny, really how the market can anticipate events
that you know, you don't. We don't people, investors don't
see coming. So I know, just from reconciling the accounts,
I know that we bought some you know you do

(37:47):
most of the purchasing this past this past week, it's
some Amazon. I know what other thing has been on
your shopping list? So to speaker, what would would be
on your shop? The individual sor w JP Morgan JP.

Speaker 2 (38:02):
You know, Google had strong earnings, still training at you know,
seventeen eighteen times earnings. You know, we're picking up a
little bit in Vidia. I know it was down a
little bit earlier this week on news that Highway is
coming out with their own artificial intelligence ship that could
take some market share from China j EPI JP Morgan
Equity Income Fund I still think is a great fund.

Speaker 1 (38:23):
And if it's from volatility in the market.

Speaker 2 (38:25):
Uber as well as I believe is cheap, especially in
the technology sector.

Speaker 1 (38:31):
Pick your prices, yeah, I think it'll be pay Johnson,
pick your prices. Regenerate on struggled a little bit lately.
I think you look at that nibble at these things.
I think it's arrogant to go all in at once.
So there's about fifteen or twenty different investments, both on
the individual side, I think also international.

Speaker 2 (38:52):
I think, yeah, the DGT is a great fund. It's
I think it's fifty percent United States twenty five percent,
and what's the twenty emerging markets about too, So that
that's a great fun and I think it's up about
five percent year to date. So now I think again,
you know, I think it's a time to be diverse
in the stock and the bond sector.

Speaker 1 (39:14):
That's the global dial ETF. You know that that invests
the largest companies around the world. You know some of
the some oils. It's got some oils in it. Yeah,
and it's it's up a little bit yere to date
as well. Correct, it's up three or four percent, right,
So you want to look at that hold some catch.
As I mentioned, be wary of information overload. If you're

(39:37):
listening to one source of news, you're either going to
get too giddy or too destraught. Focus on the long term.
And I think the title of our of our entire
newsletter and our in the closing paragraph, we say our
current sentiment resembles the title track from the nineteen eighty
five hit movie Thunderdome, We don't need another hero, sung

(39:58):
by Tina Turner, which we revised to there's no need
to be a hero. Yeah, you know, and let it
play out of it. As Warren Buffett once noted, there
are no cold strikes in this business. Remain patient with
bat in hand. And I think that's what you have
to do after after a run up. You saw you
saw Facebook or excuse a meta run up. You saw
Microsoft run up, Uh you this past week on good earnings.

(40:19):
You kind of sit back and say, Okay, if this
posts back a little bit on economic news that isn't
real favorable or or tariff news or whatever type of news,
you know, you want to have your shopping list in hand.

Speaker 2 (40:30):
Yeah, and you know, I think we saw that President
Trump talked about some deals that they made. I think
they made one with the Ukraine and rare earth minerals.
I you know, we hope to see some some news
coming out in the next couple of weeks that says, hey,
you know, you came to the deal with China, we came,
we came, came up with a deal with some maybe
members of Europe, some European countries, and then hopefully that

(40:51):
should hopefully put some sort of floor on the market.

Speaker 1 (40:53):
I think it's going to I think it's going to
take a while to have any deal with our larger
trading partners. When you think about it, if if the
larger the trading partner is with the US, or the
larger component of their economy it is, then I think

(41:14):
it's going to take a while because there's more at stake.
And also if you look at the intricacies really just
with our automobile market, but between Canada and the US
and Mexico, it's going to take very It's going to
take a lot for for all three entities to come
together and settle something. And the more the more manufacturing

(41:37):
there is that's spread around, and the more it means
for changing manufacturing, building plants and this and that, it's
just going to take a while. And so beating a
dead horse, which I think we've been doing for about
the past month hour or so, I think you just
kind of sit here and you be patient. You're focused
on the long term, and what do you think about
Let me ask you a question, though, what do you

(41:57):
think about the valuation of the market generally speaking, like
sitting in sitting in here.

Speaker 2 (42:02):
You know, I think if if if you took all
politics and geopolitics aside, it's a pretty fairly to undervalued
market in some sectors. You know. I know from a
historical metrics, it could be considered overvalue. But you know,
I think that you know, being a service based economy,
I think with the with the tailwinds that we have
in artificial intelligence and the technology that we had, you know,

(42:26):
I think I was talking with Doug a little bit
about this earlier Thursday afternoon. As you know, we we
have we have had a lot of tailwinds to the
market with the increasing and increase innovation and technology that
you know, you'd like to see that that news come
to the forefront again. You know, the innovation that we're

(42:46):
having in the chip sectors, that we're having an artificial intelligence,
how we are the leaders there, So you know, I'd
like the narrative to get back to that and the
great companies that we have UH in that America has
built with uh you know, the policies that they've in place.

Speaker 1 (43:01):
You know, and you know, and I think leading up
to the leading up to President Trump's inauguration again that
the market was up from from substantially from election day
to the inauguration. So I think that's what they expect him.
You know, I will say to give kind of a
nod of the hat to you, tip of the hat,
so to speak. You know, you have been saying for

(43:23):
a long time, and you know I've been saying it
as well. But just you know, I remember sitting here,
you know, five six, eight, ten months ago saying rebuilding
the middle class should be the priority of our politicians.
So I don't think that President Trump's the the intentions
are good, the goals are good. It's the methods in

(43:44):
which he's going about it that is causing the really
uncertainty in the market.

Speaker 2 (43:50):
Yeah, yeah, yeah, I agree. You know, we talk about
that all the time. I think building up the middle
class is one of the most important things in America.
And you know, I think Trump has said that that's
a goal of his in this administration. That's the goal
of this administration. I guess where we disagrees and how
to do it. You know, I do think that we
were we are in uh you know, America is uh,

(44:10):
you know, a country of innovation. So you know how
I think a just as good a way of doing
this wouldn't be to bring back manufacturing jobs. It would
be to create new industries through innovation that will then
lead to jobs that aren't even created yet.

Speaker 1 (44:22):
And I think the service front, you know, when we
talk about service, the service side of the equation. Netflix
is a service company. Our hotels, our service, our airlines
are service.

Speaker 2 (44:32):
So Facebook, right technology, Netflix outsourced technology and you know
to the entire world, right.

Speaker 1 (44:40):
Well, well, export technology, export technology, to export, export technology
to the entire world, and you take that into consideration.
Really actually, you know, talking about a you know, a
trade and balance that that's that's not that bad. So
so those are some things that we've got going on
in our mind as it pertains to investing.

Speaker 2 (45:01):
Uh.

Speaker 1 (45:01):
You had mentioned some some individual securities. You had mentioned
some ETFs, some dividend payers on on the individual side,
Johnson and Johnson Chevron. The XL you you had mentioned,
the x L E pays the div that's the Energy
Selex Spider E t F, you know, pays a dividend
of three or four percent. That's soft a little softening
a little bit as you get as you get economic

(45:25):
data that's coming out that's really not that uh, indicative
of a growing economy. Right you have you have oil
prices going down, and so you have the Jet B
and the jet Q in there, the dividend of risk
correct Aristocrat fund. So you know, some concerns that our

(45:45):
clients have, you know, I think as as as they call,
I think I would think the number one concern that
they have. I think what happens is that they're they're there,
they shorten up their their ability to think you know

(46:08):
their timeframes. You know, they even if you're retiring in
ten years. I think nobody likes to lose money. So
the concern that people call with right now, from my perspective,
and I'll tell you, is you know, how am I doing?
What am I doing this year? And I think for
most people they'd be surprised. I think most people are down.

(46:29):
I'll say less than five percent of our clients.

Speaker 2 (46:32):
And I think you know, a lot of people compare
their entire portfolio to the SMP, so if they're not
following their portfolio too closely, they see the S and
P at one point down ten percent, so they're like, oh, no,
I'm getting killed. But you know, if you're at orneering retirement,
you should have a substantial amount of your money out
of the market, which you know should really hold up
your portfolio in market pullbacks, in market corrections.

Speaker 1 (46:56):
Yeah, thirty percent or so, thirty to forty percent in
the bond market, you know, something like that I think
would be But I think that's the concern I get.
And then then when when you tell people, hey, you're
down three percent, you're down four percent, you're flat or
this or that, I think they feel more comfortable. I
also think they're uncomfortable with you know. I guess what

(47:19):
I would say is that, you know, what are the
ramifications of this? How will will it affect their retirement?
And I think the other thing most people don't realize
is that you're gonna go through this once every four
years or so. So if you're sixty three and you
live to eighty three and there's a bear market every
four years, you're gonna go through five of these. Now,
this the catalyst was the tariffs. You know, the catalyst

(47:40):
next time will be uh, I'm sorry if that's my
phone us, I silence it most of the time, but
I did not silence it. But the catalyst next time
or last time prior to this was interest rates going up.
The catalyst for the bear market prior to that was
the pandemic. So there's always going to be a catalyst.
It's just a matter of uh in the market always

(48:01):
kind of escapes that. This time market went down twenty
percent is measured by the S and P more than
that with the Nasdaq in the rustle two thousand. So now,
if we don't go into a recession, I think we've
seen the bottom. If President Trump's keeps pushing these tariffs,
and companies and countries keep resisting. You know, I think
we we we pull back a little bit from here,

(48:22):
but certainly volatility and trading range I agree. So anyways,
if you want to get a hold of us during
the week five four, check us out on the web
Faganasset dot com or like us on Facebook. Take care
and have a good day.